UK Unemployment Rises to 5pc as Labour Market Shows Signs of Strain

Britain’s unemployment rate has risen to 5pc for the first time since Covid, underscoring the mounting pressures facing the economy under the Labour Government.

Official data from the Office for National Statistics (ONS) confirmed that 1.79 million people were out of work in the three months to September, the highest level since December 2020.

Long-term unemployment is also edging backwards, with more than a quarter of jobseekers out of work for over a year, a threshold not reached in years.

The labour market has also been jolted by a surge in redundancies. Employers shed 134,000 jobs during the quarter, the heaviest blow since the Pandemic in early 2021. Wage growth has also weakened markedly: regular pay rose just 4.6pc, its slowest pace since spring 2022.

ONS director of economic statistics Liz McKeown said: “Taken together, these figures point to a weakening labour market.”

Rising unemployment fuels criticism of Government policy

The figures prompted an immediate backlash from the Conservatives, who accused the Government of making Britain a harder place to work and do business.

Shadow work and pensions secretary Helen Whately said: “Under this Labour Government, we have now experienced 13 consecutive months of rising unemployment.

“That’s thousands of families without the security of a regular pay packet thanks to the Chancellor’s bad choices hiking up taxes on jobs, piling red tape on businesses, and destroying confidence in the economy.

“Their high-tax, anti-business policies are driving opportunity out of Britain and making life harder for families and those searching for work.”

She warned that further tax rises expected in the upcoming Budget would deepen the strain.

Work and Pensions Secretary Pat McFadden defended the Government’s approach, insisting reforms were beginning to take effect. He said more than 329,000 people had moved into work this year but added that the latest figures showed why the Government was “stepping up our plan to get Britain working.”

Pressure on the Bank of England

Economists said the worsening data will increase pressure on the Bank of England to loosen policy. Payroll numbers fell by 32,000 in October, mirroring September’s decline, while vacancies dropped by an estimated 99,000 compared with a year earlier.

Yael Selfin, chief economist at KPMG UK, said: “Today’s data strengthens the Bank of England’s case to resume cutting interest rates next month.”

She added that private sector pay growth is likely to weaken further as more people compete for available jobs.

The Bank kept interest rates at 4pc last week.

Public sector pay outpaces private sector

Private sector wage growth slowed to 4.2pc, the weakest since early 2021, while public sector earnings climbed to 6.6pc, their fastest rate in two years.

McKeown noted: “Wage growth in the private sector slowed further, but we continue to see stronger public sector pay growth, reflecting some pay rises being awarded earlier than they were last year.”